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Fundholding in general practice and financial risk
B J Crump1, J E Cubbon, M F Drummond
1Department of Public Health Medicine, Central Birmingham Health Authority, Edgbaston.
Insights
Random yearly changes in healthcare demand significantly impact general practitioner (GP) fundholding finances, especially for smaller practices. Financial risks increase with smaller patient lists, requiring careful management to ensure scheme viability.
Area of Science:
- Health economics
- General practice management
- Healthcare finance
Background:
- General practitioner (GP) fundholding schemes aim to manage healthcare budgets.
- Variations in patient service needs can create financial unpredictability.
- Understanding these financial impacts is crucial for effective practice management.
Purpose of the Study:
- To quantify the financial effects of random annual variations in service demand on GP fundholding practices.
- To analyze these effects across different practice list sizes.
Main Methods:
- A simulation model was developed using historical referral data and hospital prices for 113 surgical procedures.
- The model simulated 100 years of expenditure for the Central Birmingham Health Authority and practices of varying list sizes (9,000 to 24,000).
Main Results:
- Annual expenditure for 179,400 residents averaged £4,832,471, with a 5.7% variation.
- A practice with 9,000 patients faced a 27.5% variation in expenditure, while a practice with 24,000 patients had a 15.3% variation.
Conclusions:
- Random fluctuations in demand for inpatient services pose significant financial risks to GP fundholding budgets.
- Smaller practices are disproportionately affected by these financial variations.
- Additional strategies are necessary to mitigate risks and ensure the success of fundholding schemes.
Objective:
To estimate the financial effect of random yearly variations in need for services on fundholding practices with various list sizes.
Design:
A simulation model was derived using historical data on general practitioner referrals for the 113 surgical procedures covered by the general practitioner fund, combined with data on the hospital prices for those procedures.
Patients:
Resident population of Central Birmingham Health Authority.
Main Outcome Measures:
Expected expenditure on the relevant surgical procedures for the whole district and for practices with list sizes of 9000, 12,000, 15,000, 18,000, 21,000, or 24,000 for each of 100 simulated years.
Results:
By using average hospital prices for the West Midlands region the mean (SD) annual expenditure for the 179,400 residents was 4,832,471 pounds (87,149 pounds); the random variation between the 5th and 95th most expensive years was 5.7% of the mean cost. For a practice with a list size of 9000 the values were 244,891 pounds (18,349 pounds), with a variation of 27.5%. With a list size of 24,000 the values were 652,762 pounds (32,512 pounds), with a variation of 15.3%.
Conclusions:
Random variations in need for inpatient services will have a significant financial impact on the practice fund. The problem will be particularly great for smaller practices. Additional measures are required to ensure that the scheme is not undermined and that the potential benefits are secured.